Reforms the farmer needs

Context – Agriculture marketing reforms announced by Government may not be enough. It will also require regulatory intervention with help of policies, investment and institutions.

The problems faced by farmers are: 

1. Result of vested, monopolistic interests: can be addressed by regulatory intervention.
2. Rooted in larger structural conditions that weaken the engagement in agricultural markets: to address this, there is a need of location-specific policies, well-directed investment, and well-functioning agricultural institutions.

Issues with APMC

• Restricted option: farmers are forced to sell their produce only to licensed APMC traders.
• Infrastructure: under-investment in the basic infrastructure required to create viable, primary wholesale markets within easy physical reach of farmers.
• Insufficient Mandis: Doubling Farmers Income Report, 2017 estimates 3,500 additional wholesale markets are needed in addition to the current 6,676 principal and sub-market yards under APMCs.
• Bureaucratic nightmare: to get a licence for new entrant.
• Intermediaries: exploiting farmers in the name of catering needs.

Experiences of reforms in APMC by different States

• Bihar: repealed APMC Act in 2006.

• Did not spur competition: as Corporation tend to buy from large traders and not farmers.
• Private markets have emerged: but are operated by local traders and commission agents.
• Deteriorating infrastructure: along with proliferation of brokers.

• Madhya Pradesh: Regulatory reform instead of repeal.

• Gave license to ITC to set up procurement hub: not only pushed price competition but also upgraded the infrastructure.
• But restricted to select commodities (and qualities), seasons and farms within ITC’s own commercial strategy.

Lesson learnt: Mandi’s have comparative advantage as permanent multi-buyer, multi-commodity market and need a regulatory architecture that enables both new and existing system to respond, adapt and compete.

What should be done?

• New allocation: towards market infrastructure specially in remote regions with deep engagement of farmers and traders.
• Regulatory reform: to remove conflict of interest and enable the entry of new buyers and facilitate the flow of trade within and outside the mandi system.
• Intermediaries: Increasing competition for intermediaries is desirable but their elimination is misguided.
• New, organised and technologically driven procurement and marketing system: to address the real constraints of farmers with respect to access to credit, inputs, transport and timely payments.

Way Forward

• Regulatory reform to increase competition must not degenerate into re-regulation that unduly favours large-scale consolidation.
• Recognise and strengthen diversity, dynamism, enterprise and resilience of India’s agricultural markets.